N50b for electricity firms to boost power

Owners of the Electricty Generation Companies (GENCOs) are to get a N50 billion prop from the Federal Government, which is desperate to expand electricity generation.

The N50 billion will come in form of a guarantee.

On behalf of the Federal Government, the Bureau of Public Enterprises (BPE) and the Nigerian Bulk Electricity Trading Company (NBET) Plc, the government signed yesterday an escrow agreement on power with three Nigerian banks in Abuja.

The three banks are United Bank for Africa (UBA), First Bank Plc and First City Monument Bank (FCMB) Plc, which is the lead escrow agent.

Although the banks will take custody of the fund, the NBET will administer the N50billion, which will be raised from the proceeds of the privatization of the PHCN successor firms.

In the absence of the World Bank to provide Partial Risk Gurantee (PRG), the fund will serve as a palliative for the new owners to improve power generation, The Nation learnt.

But, speaking after the documents signing ceremony, the Director General, BPE, Mr. Benjamin Dikki, noted that such financial guarantee should not BE taken as a grant, considering established processes required for any generation company to benefit from it.

His words: “This N50 billion is not a dash. There are certain conditions that must be met before funds can be drawn from this escrow account. The market and systems operator have to confirm the quantum of power that was put on the national grid. The market operator has to confirm that because of system defects and inefficiencies in the transmission network, certain amount of power was lost. So, there has to be a due process before any Genco can draw from this amount; it is not a gift because certain conditions have to be met.”

He said :”It is actually the generation companies that are left on the high end and we need to guarantee that whatever power they generate will be paid for if not, they will lose their capital and not able to invest in expansion of their capacities.

“We have a deficit of about 29,000 megawatts (MW) of basic power needed to stabilise our power needs of 40,000MW and the average cost of installing a megawatt is about $1.3 million and that will mean an investment of $7.5 billion for 5000MW, and so we need to make sure that we create the atmosphere that will enable these generation companies to make investments without worrying whether they will be able to recoup monies they have invested and that is why this escrow account was created,” Dikki said.

On the roles of the banks, Dikki said: “The banks are the custodians of the money, which is deposited in them and we want to establish a process through which this money will be drawn and not just drawn frivolously; that is why the BPE, Bulk Trader and the banks signed the agreement to say that you have to follow a process to draw this money; otherwise, there will be penalties.”

The distribution companies are not covered by this escrow account because they have committed to reducing the Aggregate Technical Commercial and Collection (ATC&C) losses of the companies.

Dikki said: “If you recall, they (distribution companies) were not given to the highest bidder but to those that committed to reducing ATC&C losses by a certain percentage and so they have committed and have given a technical proposal with a business plan cataloguing the level of investments that they will make every year in this regard.”

One thought on “N50b for electricity firms to boost power”

Adedayo, why does FGN need to provide comfort to lenders? Should it not be part of due diligence to ensure the companies buying the assets are financially strong enough to finance their own operations? Are we going to do the same for whoever buys the refineries? The oil blocks and other privatized entities? Regarding tariffs, MYTO is already there. It is operated by NERC and is designed to help the transition period. Fact is, there is no excuse for providing $3b equivalent to these people. The only problem is that the government and people who bought the assets are one and the same. Stop providing rationalization so for those bent on privatizing public funds.